Second short-seller makes allegations against Silvercorp

Silvercorp Metals Inc. has been struck with another short-seller report accusing it of fraud — and this time with a name attached.

Alfredlittle.com, a widely-followed site that publishes short-seller research on Chinese companies, said that Silvercorp’s production and resource estimates for its flagship Ying mine are far higher than what is reported locally in China. It stated that the authors of Silvercorp’s independent resource reports are a two-man consulting outfit with “no employees, no office and no business licence.”

Alfred Little said it spent two weeks counting the trucks delivering ore to Silvercorp’s mills, and determined that activity was about 34.3% less than expected.

“Therefore production continues to be at least [a third] less than expected,” the report says.

It also claims that management failed to disclose that the company’s largest customer is a related party.

Sivlercorp shares plunged more than 15% on Tuesday after the document was published.

The Alfred Little report has emerged less than two weeks after an anonymous short seller published a similar document with a number of allegations against Vancouver-based Silvercorp. The company and the British Columbia Securities Commission are trying to determine who wrote it.

This new report contains some of the same claims as the anonymous one. That includes allegations of related party transactions, and a claim that the Ying mine is worth far less than thought based on an auction by one of Silvercorp’s joint venture partners.

Chinese companies such as Silvercorp have come under far greater scrutiny since short seller Muddy Waters LLC accused Sino-Forest Corp. of fraud back in June. Sino-Forest shares were recently cease-traded by the Ontario Securities Commission.

After Muddy Waters, Alfred Little is one of the most widely-followed publishers of fraud accusations against Chinese companies listed on North American exchanges. It is made up of a loosely-connected group of consultants and analysts, none of whom are identified. At the end of the Silvercorp report, the contributors said they “feel threatened” by the companies they expose and value their privacy.

“We seek only to profit from the truth,” the report says.